A Review of the Nigerian Energy Industry

Financial market update

Financial markets28 April 2014, Sweetcrude, Houston, Texas – Local and international financial market products and services update.
NIGERIA: The World Bank said it will provide Nigeria with projects worth $8 billion targeting job creation, social services and governance as part of its new country partnership strategy with Africa’s largest economy. Nigeria, the continent’s most populous nation with about 170 million people, will get $2 billion annually, disbursed through the International Development Association and International Bank for Reconstruction and Development, the Washington-based lender said today in an e-mailed statement.

On Friday, we saw some weakness creeping into the market on the back of the fact that market players expected another OMO auction. No OMO auction was announced and on that note we saw average yields closing 25bps higher on tbills to 11.98% and 12bps higher on bonds to 13.31%. Relatively quiet day, as sellers outnumbered buyers in the tbill market. The bond market was also extremely quiet. The new OMO bill – 28 Aug 2014 and the new 1 year bill – 23 Apr 2015 start trading in the secondary market today.

COMMODITIES: West Texas Intermediate rose and the WTI for June delivery rose as much as 82 cents to $101.42 a barrel in electronic trading on the New York Mercantile Exchange.

FX: As expected, the market was capped at 161.20 on Friday, trading a tight 161.00-20 range in the early session. Just when it looked like the 161.00 level would provide strong support for the pair, it broke after a few tests dragging us gradually to a 160.70 low. Current levels look attractive for USD buyers and we may see some demand trickle-in, however not enough to completely offset the oil inflows expected to come in this week; fixing our next support levels around 160.20-40 and resistance at 161, after that 161.30.

US: U.S. policymakers have the chance this week to give clearer guidance on the future path of interest rates and settle markets that are uncertain over how and when a hike would occur. Global financial markets are still on alert for developments in Ukraine, with the United States and its G7 partners preparing tougher sanctions against Russia. But investors will have much to chew over, including Federal Reserve and Bank of Japan policy meetings and data from U.S. growth and jobs to euro zone inflation.

CHINA: China must act cautiously in cutting leverage ratios in the corporate and government sectors, as any abrupt move could deal a blow to an economy that is already slowing, a senior central bank official said in remarks published on Monday. Xu Nuojin, a deputy director of the statistics department of the People’s Bank of China, said the slowing economy could expose the property sector and local government financing vehicles to high risks, potentially becoming the biggest concern for world’s second-largest economy.

Macro Economic Indicators
Inflation rate (yoy) for Mar. 2014              7.8%
Monetary Policy Rate current                     12%
FX Reserves (Bn $) as at Apr. 24           38.102

Money Market Highlights
O/N                                 10.5417
30 Day                            12.5598
90 Day                            13.4664
180 Day                          14.3908
USD 1 Month                 0.1520
USD 2 Months               0.1925
USD 3 Months               0.2266
USD 6 Months               0.3230
USD 12 Months             0.5495

Benchmark Yields
Tenor              Maturity            Yield
91d                      24-Jul-14            11.13
182d                   09-Oct-14           11.65
364d                   09-Apr-15          13.26
2y                        23-Apr-15          12.90
4y                        31-Aug-17           12.59
5y                        30-May-18          12.63

Indicative Currency Exchange Rates
                           Bid          Offer
EURUSD           1.3793      1.3895
GBPUSD            1.6779      1.6882
USDJPY             102.205   102.235
USDCHF           0.8757       0.8859
GBPEUR           1.1931         1.2033
USDZAR           10.5432    10.7493
USDNGN           160.50      161.20
JPYNGN            1.5707       1.7207
CHFNGN          187.26        192.86
EURNGN          227.56       232.76
GBPNGN          273.06       278.26
ZARNGN           14.32          18.12

                               Hi                  Low        Close        Prev.Close
USD/NGN   161.20/30    160.60/70   160.80/90   161.00/10

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